Indian railways financial meltdown

Preface

Ever since the publication of White Paper on Indian Railways and its presentation to the Parliament on 18th December, 2009, an interesting but controversial issue was raised about the nature and causes of railways’ crises regarding finances and management. The railway was declared as stagnant sector, crushed under its own weight, causing immobility, inefficiency and incompetence. As per White Paper, the traffic growth performance remained below par and railways’ contribution to GDP came to a stand still at 1.18. It was complained that the carrying capacity (CC) of wagons had a bearing on the wear and tear of the tracks and the rolling stock. In spite of reduced terminal detention and increased maintenance cycle for better utilization of assets, the railway was far away from the operational efficiency compared to international benchmark. The White Paper harped on losses in passenger operation which grew cumulatively high above several thousand crore of rupees posing as if the paper would bring railways to settle down those losses. The main contention of White Paper centred round ‘two’ critical changes in accounting norms which, on iterative process, inflated the cash surplus before dividend due to the consultant’s imagination, stretching out the amount by more than Rs. 17000 crore. So this amount ought to be retrieved to normal condition by resettling the changes in accounts. The issues primarily before the railways relate to the same as were emphasized by earlier White Papers, Expert Group Report and other recommendations made by railways own committees and working groups established from time to time.

The White Paper, in general, is supposed to be a document of self introspection, indicating infirmities and weaknesses of the organization or the department. It tries to find out solution of the problems which the organization is facing with full transparency and coordination among its workers, staff and the bosses. The White Paper is a cooperative endeavour to improve upon the situation and looking after the possibility of generating better opportunities of work and action. The White Paper at times is issued to clear the misunderstanding prevailing in respect of working, control and progress of the institution. It is an answer to those who demand an explanation from the organization regarding its failure in achieving the aim for which it is established. Normally it is the authority which explains the view point to its people or the general public who has the right to know on the nature and causes of unprecedented happenings or any other serious matter. Since the White Paper goes in depth of the maladies prevailing in the departmental set up, it is not a thing to rejoice or celebrate. The white paper is characterized by its dispassionate approach of analysis, unbiased attitude and neutrality in judgment. Issuing White Paper is like presenting a reality show which explains true situation – the condition as it exists.

But the White Paper on Indian railways issued in December, 2009, does not justify its basic character and approach to introspection and self analysis. It is confined to a particular period of study and directly comes to the controversial situation of judging a particular regime, its leader and the activities which have been performed. Although care has been taken in not naming the person or the achievements, but viewing the entirety of the situation one can never fail to understand the reality behind the White Paper.

The present study provides an exposure of the reality – a case of counteracting the White Paper on Indian Railways as well as their financial meltdown. It is a well known fact that the White Paper expresses the inner feelings of being proud of creating an intensive study of the past five years 2004-2009 which belong to the regime of the person known to be the leader of turnaround. No White Paper has ever been presented so partial in approach as incumbent of the railways. Still one finds that the predecessor has been the highest scorer of the railways’ innings so far played. Two chapters viz., sixth and seventh have been added to highlight in general terms the financial and managerial syndrome and diagnostic analysis of the railways’ failing health. In eighth and ninth chapters, the White Paper has been put to test to find out in historical context how it is relevant when the railways have already experienced a glut of White Papers after liberalization and how it stands face to face with turnaround event of the railways which has become a historical fact. There is no denying the fact that reforms and changes are needed for railways as discussed in tenth chapter, but neither restructuring nor privatizing them is the real answer. Chapter eleventh brings an analytical study of the present changing situation i.e., ‘White Paper and Beyond’. It provides a situation to understand how dangerously the railways have sunk into a quagmire. The railways require transformation but a surfeit of White Papers and other such reports have strangulated them making them ineffective to respond to any change. Chapter eleven relates to the present period of great neglect creating financial meltdown and administrative deterioration. In the end, conclusions have been drawn interrelating railways moving from Turnaround to White Paper and their aftermath.

This brings out an entire thesis – an answer to the questionable assessment of the period which has formed the basis of the White Paper and ultimately became the cause of railways meltdown. The author has not used names of the players in the game of issuing the White Paper to keep them away from appearing repeatedly in the entire text. So the reader has to judge the sequence of the facts and happenings according to the ‘predecessor’ and ‘successor’ who are well known persons and have worked during their stint within the period of study i.e., 2004-09 and 2009-11 respectively. The study has analyzed the situation to find out how the White Paper stands in justifying its case in projecting a particular period or regime in the larger context of the railways’ transformation into a world-class system. The author takes the responsibility for anything offending appearing inadvertently in this analytical work and apologizes for the same in advance. A corrective measure is always open if some such facts are brought to notice. The author offers all success to his readers and keeps follies and faults as a part of his own share of assessment. It is personal but necessary for the author to express his thanks to his wife Smt. Nirmalesh Misra for going through the entire text and providing valuable suggestions and also his daughter Kirti for the cooperation and support provided for finishing the work in time.

New Delhi Sept, 2012.

R.N.Misra

Acknowledgements

The author is obliged to the ministry of railways, government of India, for using extensively the extracts of the publications ‘White Paper on Indian Railways’ and ‘Vision 2020′, issued in December 2009. There appeared a lot of material in the media – print and electronic – regarding the White Paper and the author feels obliged to such persons and institutions for the help provided including the organizers of the Dailies, namely Times of India, The Hindu, The Economic Times and Business Line and the relevant material made available through other important news papers and the magazines – weekly and fortnightly. The author is obliged to the insiders of the railways who from time to time helped in organizing the material for the study. The author is profoundly indebted to Prof. Ram Deo Bhandari, ex-Member of Parliament, who made available to him the copies of White Paper and Vision 2020 when these were presented to the Parliament as the publications were not priced for sale (now available on internet). The author expresses deep sense of obligation to the members of Railway Board and other staff, specially the academic, linked with the railways’ institutes and study centres. The author came in contact directly or indirectly with important employees of the railways who encouraged him to write on the subject as it was timely and needed to be explained for the Indian people, in general, and railway-staff, in particular. Shri N. K. Gupta, Dr. N. C. Satyawadi and Dr. Ramanan were of special help to him. The author’s elder brother Shri S.N. Misra, who served the Indian Railways in several capacities from station-in-charge to the researcher at RITES, had directed him to link up to several bosses who in their capacity had power to drive and direct the railways’ policies and programmes. The author shall be failing in his duty if he does not mention the learned and highly experienced ex-employee of the railways, Shri A.V. Paulose who retired as the finance commissioner (Member Finance), Railway Board, and is still active in study and research concerning railways’ finances and other policy matters for useful discussions with him.

The Genesis

It was on 18th December, 2009, that the White Paper on Indian Railways was presented to the Parliament by the then minister of railways – Mamata Banerjee. This was brought out in retaliation against the achievements of the preceding minister – Lalu Prasad who created turnaround of Indian Railways, generating unprecedented profits.

The appearance of the ‘White Paper on Indian Railways’ created an impression that the turnaround process of the railways was much hyped than real. This raised a controversy rather disbelief in the minds of the people in general and railways’ staff in particular about the earlier achievements of the predecessor.

The present work is the outcome of the situation where an analytical study has been made to provide an answer to the faulty findings of the ‘White Paper’ and has established an anti-thesis of the same. This study thus protects the concept of turnaround of Indian Railways and its transformation from loss bearing to profit generating organization.

Hereafter the ‘predecessor’ will stand for Lalu Prasad and ‘the then incumbent of Rail Bhavan for Mamata Banerjee’ in the entire years of text in order to avoid names appearing repeatedly. The analysis of Lalu Prasad belong to the period from May 2004 to April 2009 and that of Mamata Banerjee to the period from May 2009 to May 2011. The name of Lalu Prasad has been substituted in several like leader of the turnaround, the ex-minister or the former ways minister, the old guard of the railways etc., and the name of Mamata Banerjee has been substituted almost opposite like the new incumbent or the then incumbent of Rail Bhavan or the then minister for the railways or the successor etc. Mamata Banerjee left the railways portfolio in May 2011. Since then the ministry of railways went into three more hands (The Prime Minister Singh; Shri Dinesh Trivedi and Shri Mukul Roy) but it is Ms. Banerjee who still dominates the railways with de facto power

to handle the organization. One can relate the names the period and the situation as they appear in the text.